In this first part of our How To Trade Crypto series, we talk about how successful crypto traders and investors are created, and how you can become one too.
Becoming Successful Crypto Traders & Investors
Although there is no magic formula when it comes to trading and investing, there are 5 important pillars one should build on to create a solid foundation to become successful crypto traders and investors.
1. Risk Management
“As a trader, your absolute first goal is to learn how to stay in the game.”– Trader Dante
Risk management is highly underrated, and also consequently why more than 95% of traders lose money. Hence, your first step to achieving trading success should be to learn how to avoid getting rekt.
“I’m always thinking about losing money as opposed to making money. Don’t focus on making money, focus on protecting what you have.”– Paul Tudor Jones
More important than learning how to make big profits, you’ll need to know how to preserve your capital so you actually have something to trade with. The only way to do this is by having and following a sound money management and risk management plan.
Pick your spots, and don’t force trades. Wait for your favourite, highest probability setups to appear before entering a trade. Especially since the cryptocurrency markets are open 24/7, you can always be sure there’s a good opportunity waiting for you out there.
“Play the market only when all factors are in your favour. No person can play the market all the time and win. There are times when you should be completely out of the market, for emotional as well as economic reasons.”– Jesse Livermore
Keep in mind that sometimes the best trade is no trade, and that cash is also a position.
“If investing is entertaining, if you’re having fun, you’re probably not making any money. Good investing is boring.”– George Soros
A successful trader is a disciplined one, and apart from having patience, you’ll also need a plan to succeed.
Forming a trading strategy that suits your style is fundamental to becoming a profitable trader. Have a trading system in place, with rules to govern your trading entries and exits, instead of trading “just because you feel like it”. In short, plan your trades before pulling the trigger.
Although trading almost always doesn’t go according to plan, that doesn’t mean you don’t need one!
Having a plan not only helps you manage risk but also helps you avoid succumbing to emotional trades.
4. Emotional Control
What’s the one common thing between all markets? Humans.
Since a core component of trading is people, it seems reasonable to think that studying human psychology and market behaviour is beneficial to becoming better traders.
What we’re saying here is not to ditch all the fundamental and technical analyses, or to forget about reading the news — these are still important components. However, what we’re saying is that perhaps through studying human behaviour you could gain an extra edge over other market participants.
“If you can learn to create a state of mind that is not affected by the market’s behaviour, the struggle will cease to exist.”– Mark Douglas
Moreover, doing so will help you to observe and better control your emotions — an essential skill for becoming a successful trader.
5. Realistic Goals
Lastly, trading is a long and arduous journey. 75% of all day traders quit within the first two years, while it takes an average of 5 years for traders to become consistently profitable.
Do not fall into the trap of thinking that simply investing in cryptocurrencies or that knowing the basics of trading are going to make you rich quickly. That is a highly dangerous mindset, and you will have to reassess your expectations if you want to succeed.
Cryptocurrency trading is not a get-rich-quick-scheme. Look at it as such and you’ll likely take excessive risk and bust your account. Plan for the next 3 to 5 years, instead of thinking only about the next week or month.
“The goal of a successful trader is to make the best trades. Money is secondary.”– Alexander Elder
Successful crypto traders focus on making the best trades possible. Take care of that, and the money will come in naturally.
The Journey to Becoming Successful Crypto Traders & Investors
So now that you know these 5 pillars by heart (you better!), does that automatically make you a profitable trader? We sure hope this helps to strengthen your foundation and avoid the same mistakes we made, but it will by no means make you magically profitable!
That is something that you will have to master through thousands of hours of screen time and deliberate practice.
“Investing is not a game where the guy with the 160 IQ beats the guy with a 130 IQ.”– Warren Buffett
Great news: trading is not rocket science! Thankfully, the odds are not stacked against us, and it’s a fair playing field for everyone. People from all walks of life have succeeded before you, and we’re confident that you will too.
If you put in enough time and effort, have the determination and the right mindset, and with a little guidance to keep you on the right path — you too, can become one of these successful crypto traders!